Astrotech Corp (ASTC) (~$24MM market cap) is an odd little microcap that IPO’d in 1995 as an aerospace company dubbed SPACEHUB, however, when the U.S. wound down the manned space program the company sold most of their operations to Lockheed and pivoted to “mass spectrometry technology” (don’t ask me what this means) in the mid-2000s. Astrotech has struggled to find a use case for their technology, they’re currently pursuing testing for explosives in travel settings, cannibas industry applications and viral/COVID testing, all while generating minimal revenue in the past half decade. The one thing they have sold plenty of is stock, during the mania of 2020-2021, Astrotech sold $79.4MM in equity in a series of capital raises. As of 3/31, they only have $44.1MM of cash remaining and no debt, making it a net-net, albeit a low quality cash burning one. If there was any doubt of management’s lack of capital allocation skills, Astrotech announced a new ATM equity program earlier this month despite shares trading at an extreme discount to net cash.
Earlier this week, BML Investment Partners (good firm to watch, often involved in a lot of these broken biotechs and other net nets) re-entered the picture by amending their 13D to include an offer to buy the shares they don’t own (currently own 13.1%) for $17.25/share. In the exhibit, they included a brief letter below:
The CEO, Thomas Pickens III, owns 8.3% of the company (management has a whole owns 9.7%), he pays himself handsomely, some $1.2MM in 2022 which included a $450k salary and $375k cash bonus, added together that’s just under the $869k in revenue the company did during the same timeframe. So at first glance, I didn’t like BML’s chances of convincing the board to take their offer.
But an interesting thing happened yesterday afternoon, a day after receiving BML’s offer, the company did indeed cancel their ATM program, which is a stipulation of the deal. Why do that if they weren’t serious about evaluating the offer? Especially since the shares spiked up, making it more attractive to execute the ATM if that’s the path they wanted to take. That action alone is worth a small position for me. BML did put a strangely tight timeframe on a response, but hopefully the company has already met that threshold by cancelling the ATM and acknowledging the offer in an 8-K. From my memory, I don’t remember BML buying a company outright, but they are experienced in liquidation scenarios and have likely helped companies execute them behind the scenes. This doesn’t seem like a stretch for them and there’s no financing condition.
Shares currently trade for $14 or roughly a 20% discount to the offer price.
Disclosure: I own shares of ASTC
